How General Motors Company Will Fix Cadillac's Epic Sales Swoon

The all-new 2015 Cadillac Escalade SUV, unveiled by former Cadillac chief Bob Ferguson in New York last fall, is on sale now. It's receiving very strong reviews. But Cadillac's lack of a small crossover SUV is hurting the brand's sales. Source: General Motors.

What's wrong with Cadillac?

After a strong year in 2013, in which U.S. sales rose 22% (and global sales were up 28%) General Motors' (NYSE: GM  ) vaunted luxury brand is in a slump, at least in its home market.

Through the first seven months of 2014, overall U.S. Cadillac sales were down 2%, thanks to sharp declines in sales for the brand's mainstay sedans.

That's not good. But the revival of Cadillac as a global competitor to the big German luxury brands is a high-priority project for GM's management. 

GM recently hired a new chief for Cadillac, former Infiniti head (and Audi executive) Johan de Nysschen. What will he and his new colleagues do to fix the old brand's slump?

What Cadillac needs most: More crossovers, soon
Cadillac officials say one of their main challenges right now is the brand's product portfolio: It has a few holes, which include segments that are among the hottest and most profitable in the business.

Filling those holes should do a lot to boost the brand's sales, and there's reason to believe several new Cadillacs are on the way. 

The Cadillac SRX crossover is nearing the end of its run, but sales are continuing to grow. A new SRX is expected next year, and a smaller Cadillac crossover may follow. Source: General Motors.

Among the most glaring of those holes: crossover SUVs. Luxury crossovers have been white-hot recently, part of an industrywide trend that has seen consumers shifting toward crossovers and away from cars. 

The competition is doing well: As a group, sales of BMW's crossovers were up 19% through the first seven months of 2014, and Audi's big Q7 rose almost 25% over the same period. 

Cadillac does have one crossover, the midsize SRX. Even though the SRX is a dated model that will be replaced soon, U.S. sales are up almost 16% this year. 

Cadillac also has the big Escalade SUV. It's all-new for 2015, and early sales have been very strong. But this isn't 2004: Nice as it is, the big truck-based Escalade is a niche product nowadays. 

GM recently confirmed that an all-new version of the SRX will arrive next year. That will help considerably. But Cadillac could also use a smaller compact crossover, something like the Lincoln MKC that old rival Ford just introduced. 

One may be under development. Redesigned versions of GM's Buick and Chevy crossovers are expected to arrive in 2017, and there have been hints that a new small Cadillac version could arrive at about the same time. (It's possible that a bigger Cadillac crossover, one size up from the SRX, could be in the works as well.)

The new SRX and a new smaller crossover should give Cadillac sales a big boost, both here and abroad. 

But the SRX isn't the only new Cadillac due to launch next year. There's also a model that won't sell in giant numbers, but that should raise Cadillac's prestige (and profits) considerably.

Coming next year: The Cadillac of Cadillacs
For years, rumors have swirled about a "flagship" Cadillac, a no-holds-barred full-size Cadillac sedan that could go toe-to-toe with Daimler's Mercedes-Benz S-Class, which is widely considered one of the finest and most advanced cars in the world. 

Now we know for sure: That big new Cadillac sedan is coming next year.

Cadillac chief engineer Dave Leone recently confirmed to Bloomberg that an all-new full-size Cadillac sedan will arrive at U.S. dealers late in 2015. Other sources have hinted that the new sedan will be unveiled at the New York International Auto Show next spring.

GM hasn't told us what the new Cadillac will be called. But we've seen hints of what it will look like in two recent Cadillac show cars that are widely believed to be a preview of the brand's future styling: the Ciel and the Elmiraj.

The Cadillac Ciel concept, revealed in 2012, was the first look into GM's intentions for a future range-topping model for Cadillac. Source: General Motors.

When the Ciel was unveiled in 2012, GM said it was the first of three concepts that would show the future direction of Cadillac. It's a big, opulent convertible, trimmed with top-notch leather and loaded with luxury features, that recalls the huge and imposing luxury cars of Cadillac's heyday. But it also reflects the cutting-edge image GM hopes to establish for the brand: The Ciel is a hybrid.

The second of those three Cadillac concepts, the Elmiraj coupe, was revealed last year to wide acclaim. The Elmiraj isn't a hybrid; it has a 4.5 liter twin-turbo V8 that might be a preview of a new range of Cadillac engines. It's clearly meant to recall the spirit of the mid-1960s Cadillac Eldorados, which were advanced, stylish, and big luxury coupes.

As you can see in the photo below, the Elmiraj shares many of the Ciel's distinctive styling elements. Like the Ciel, it's different from current Cadillacs, but still recognizable.

GM officials say Cadillac dealers would love a production version of last year's Elmiraj concept. But it won't happen for several years, if at all. Source: General Motors.

The third concept Cadillac will almost certainly be the new sedan, and it's a safe bet that its styling will build on what we've seen with the Ciel and the Elmiraj.

Will these new Cadillacs be enough?
Rebuilding a brand doesn't happen overnight -- or in a matter of just a few years. Perhaps the biggest challenge facing GM's luxury marque is just getting customers of the German luxury brands to take Cadillac seriously

Recent models like the ATS sedan are strong contenders, at least in comparison tests, but so far they don't appear to be drawing BMW owners to Cadillac showrooms.

Changing that will be a challenge that takes years. But it starts with great products. Cadillac needs more of them. Can GM's much-improved product-development teams deliver? We'll find out, starting next year.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 31, 2014, at 3:41 PM, joeybagofdonuts wrote:

    GM isn't selling expensive cars because it can't. Simply as that.

    Caddy's cars are priced at the same price points as BMW, Mercedes and Audi. "They are just as good." Yeah right -- the free market says otherwise.

    My 2004 Caddy SRX needed a new tranny and wheel bearings at 70k miles. My 2007 GMC Denali has perpetually broken electric locks and the alternator went at 60k miles. I won't even mention my 2001 Chevy Suburban (remember the "American Revolution"), or the pathetic resale values. No more GM for me -- ever.

    It is simple supply and demand. No demand = no sales. Whereas BMW and Audi are selling every car they can make.

    Once GM trots out the incentives, Caddies will start to sell. They cannot compete at the same price point as better cars -- simple as that.

  • Report this Comment On September 01, 2014, at 2:04 PM, shooter9mm wrote:

    Why after after knowing for years about the defects & KILLING nearly 20 people would ANYONE buy a GM product,as in Government Motors. we bail them out, they KILL us.

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John Rosevear is the Fool's Senior Auto Specialist. John has been writing about the auto business and investing for over 20 years, and for The Motley Fool since 2007.

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